Buy-to-let property value to hit £1 trillion next year

The value of buy-to-let properties is expected to exceed £1 trillion by spring 2015 thanks to rising house prices and plans for retirees to free their pension cash and invest in property.

According to Kent Reliance, since 2001 the private rented sector has expanded by two million households and by 2016 there will be five million families renting in the UK – just under one in five households.

The value of buy-to-let properties has also grown over this period and landlords now own bricks and mortar worth a total of £930,7 billion – three and a half time the £262.1 billion worth of homes they owned in 2001.

Rising house prices and an inability for people to buy their own home mean that the private rented sector is set to grow further and Kent Reliance said that the value would break through the £1 trillion barrier in the second quarter of 2015.

The majority, 61%, of the sector’s growth has happened in London as house prices have rocketed and landlords have seen the value of their assets increase £166 billion. The capital currently makes up 41% of the sectors value at a total of £377.3 billion and the South East provides £137 billion.

This growth will have a helping hand come April next year as those aged over 55 will be given access to their entire pension fund under new pension freedom rules and it is predicted many savers will strip their pensions and plough money into the buy-to-let market, pushing house prices up further.

While rising house prices boost the capital value of a property it has reduced the yield for landlords. Since 2007 the average landlord has made £83,000 on their property and in London gross returns have totalled £224,257.

Landlords receive a total of £3.8 billion in rent every month.

Andy Golding, chief executive of OneSavings Bank – the owner of Kent Reliance, said: ‘Landlords have benefited from the recovery in house prices since 2009, which has pushed their wealth to within touching distance of £1 trillion. But as the sector’s value marches upwards, the main impetus has come from the growth in the number of households as demand from tenants continues to climb.’

‘Private renting isn’t a flash in the pan and 80% of new households since 2001 have been accounted for in rental properties. While for many it is a lifestyle choice, the ongoing squeeze on wages, rising house prices, not to mention difficulty in obtaining sufficient mortgage finances is accentuating this shift in tenure from owner occupation to long term renting. In many ways, Britain is becoming a more normal nation, much more like its continental neighbours as a result.’